Iran – The Hybrid Policy Dividend Window Under Sanctions and LHZ Auto's Strategic Commitment
Iran is one of the largest automotive consumer markets in the Middle East and a core strategic pillar of LHZ Auto's global site matrix in the Middle East region. According to reports from the Ministry of Commerce Country Trade and Investment Environment Information Network, Iran's new fiscal year budget bill significantly reduced import tariffs on hybrid vehicles and small-displacement fuel vehicles. Import tariffs on hybrid vehicles were reduced from 100% to 40%, on vehicles with engine displacement below 1.5 liters from 110% to 40%, and on vehicles with engine displacement between 1.5 and 2.0 liters from 120% to 70%. Import tariffs on pure electric vehicles remain at 4%, and on plug-in hybrid vehicles at 15%.
The Iranian automotive market is characterized by a high reliance on imports and local assembly. Due to long-term international sanctions, mainstream European, American, Japanese, and Korean automotive brands are largely unable to enter the Iranian market, which is primarily occupied by local manufacturers and Chinese automakers. This structural gap makes Iran a key strategic market for Chinese automobile exports. In 2025, China's automobile exports to Iran reached approximately 164,000 units, accounting for nearly 20% of the Iranian market, making China the core foreign automotive supplier in the country. A large number of Iranian local brands produce and sell rebadged Chinese models: BAC sells the Geely GX3, Fownix sells rebadged Chery models, and Xtrim sells Exeed models, forming a deep-penetration rebadging network for Chinese brands.
Following the joint US-Israeli military strike at the end of February 2026, the Iranian automotive market landscape underwent a disruptive transformation, rapidly shifting from a core Middle East market for Chinese automakers to a high-risk conflict zone, with industry scale shrinking significantly. In January and February 2026, Iran's automotive import sales plummeted by over 70%, and the market share of Chinese brands fell below 5%. Major automakers rapidly scaled back their presence. Geely has completely terminated its business operations in Iran, and Changan's CKD parts assembly project has been fully suspended. Only a very few brands such as Chery maintain a limited volume of complete vehicle imports and parts supply operations under a light-asset model. Currently, there are no mainstream European, American, Japanese, or Korean brands operating regularly in the Iranian market. Although Chinese brands have no direct competitors at present, the industry has fallen into a dilemma of no competition, no growth, and no circulation, accompanied by the extreme contraction of the overall market size.
Latest market developments indicate that Iran's import tariff policy for automobiles may face further tightening. It has been reported that the Iranian government plans to uniformly adjust import tariffs on automobiles to a minimum of 100%, meaning that hybrids, pure electric vehicles, and small-displacement models that previously enjoyed low tariffs would face significant tax increases. If implemented, this policy would completely eliminate the tariff advantages of new energy vehicles. Iran's Audit Court has opposed this, arguing that a uniform 100% tariff conflicts with the provisions of the Automotive Industry Law and the Clean Air Law regarding tiered taxation based on displacement, fuel consumption, and emissions, and has demanded that the government strictly implement the tiered tariff system. In September 2026, Iran launched new regulations for used car imports, allowing the import of used vehicles aged 3 to 5 years (2021-2022 models), with imports required to be settled in euros and requiring commercial card qualifications.
On the logistics delivery front, LHZ Auto leverages the overland capacity of LHZ Trucking and the sea freight resources of its Nansha headquarters to build a dual-channel delivery system. The overland channel departs from Khorgos port, transiting through Kazakhstan, Uzbekistan, and Turkmenistan directly to Iran, with a total transit time of 10 to 12 days. The southern alternative route goes through the Khunjerab Pass in Kashgar, southward along the China-Pakistan Friendship Highway into western Pakistan, and then into Iran, with a total transit time of 15 to 18 days, providing flexible switching when the northern route is obstructed. LHZ Auto Khorgos Xinjiang Operation Center forms a deep logistics and trade synergy with LHZ Trucking. The LHZ-TIR road brand operates over 1,500 owned and partnered TIR vehicles, including 300 Kazakhstan-plated specialized car carriers, each capable of loading 8 passenger vehicles, distributed across six hubs in China, Kazakhstan, Turkey, Russia, Belarus, and Germany. The Nansha headquarters also houses LHZ Auto (China) Deep Customized Automotive Co., Ltd.'s core custom modification functions, providing full-process customization services for the Iranian market, including emission standard adaptation.
On the market access front, Iran is not an EAEU member state and applies independent tariff and certification systems for imported vehicles. Imported vehicles must comply with Iranian technical regulations and complete local certification before sale. On the payment front, international payment channels are restricted due to sanctions, with currently viable solutions including CIPS RMB settlement. LHZ Auto Iran site (www.lhzauto.ir) focuses on B2B complete vehicle exports and wholesale, providing clients with full-chain trade services from demand analysis, model matching, compliance certification consulting, and logistics distribution to customs clearance delivery.
FAQ
Q1: What is the size and structure of the Iranian automotive market?
Iran was once the largest automotive consumer market in the Middle East, with industry scale holding regional core influence. In 2025, China's automobile exports to Iran reached approximately 164,000 units, accounting for nearly 20% of the Iranian market.
Q2: What adjustments did Iran's 2026 new fiscal year budget make to automobile import tariffs?
Import tariffs on hybrid vehicles were reduced from 100% to 40%, on vehicles below 1.5 liters from 110% to 40%, and on vehicles between 1.5 and 2.0 liters from 120% to 70%. Tariffs on pure electric vehicles remain at 4%, and on plug-in hybrids at 15%.
Q3: What changes occurred in the Iranian market after the February 2026 military conflict?
The market share of Chinese brands plummeted from 20% to below 5%. Geely fully withdrew, Changan's CKD project was suspended, and only a few brands like Chery maintain light-asset operations. The market has fallen into a dilemma of no competition and no growth.
Q4: What are the latest tariff policy changes in the Iranian market?
It has been reported that Iran plans to uniformly adjust import tariffs on automobiles to a minimum of 100%, eliminating the tariff advantages of new energy vehicles. Iran's Audit Court has opposed this, demanding the implementation of a tiered tariff system.
Q5: What are the changes in Iran's used car import policy?
In September 2026, new regulations for used car imports were launched, allowing the import of used vehicles aged 3 to 5 years, requiring settlement in euros and commercial card qualifications.
Q6: What channels does LHZ Trucking offer for transporting vehicles to Iran?
The northern route goes through Khorgos, transiting Kazakhstan, Uzbekistan, and Turkmenistan directly to Iran, taking 10 to 12 days. The southern alternative route goes through Khunjerab Pass in Kashgar into Pakistan and then into Iran, taking 15 to 18 days.
Q7: What services does LHZ Auto Iran site provide?
LHZ Auto Iran site (www.lhzauto.ir) focuses on B2B complete vehicle exports and wholesale, providing full-chain trade services from demand analysis, model matching, and compliance certification consulting to customs clearance delivery.
LHZ Auto Iran Operation Center | Website: www.lhzauto.ir | Guangzhou Nansha: 15220000555 | Khorgos: 19259087888 | Email: china@lhzauto.com